NEW YORK — The municipal market strode through a reasonably successful week of issuance and secondary trading.
Now it’s starting to focus more on the U.S. debt ceiling talks. And until there’s demonstrable progress, the market will be rather lethargic, a trader in Chicago predicted.
“The market’s flat,” he said. “And it’s going to be that way, until there’s movement in the [debt ceiling] talks. We might go back and forth a few basis points, though.”
Traders also don’t expect much to change following the second session of Federal Reserve Board Chairman Ben S. Bernanke’s testimony on Capitol Hill. He is currently being grilled by the Senate Banking, Housing, and Urban Affairs committee after presenting the same testimony he offered the House Financial Services Committee Wednesday: that the Fed will act, if necessary, to either tighten or loosen monetary policy.
“The Senate gets the replay of [Wednesday’s] testimony,” the trader said.
Muni yields started Thursday steady across the curve, according to the Municipal Market Data scale. The benchmark 10-year muni yield held steady Wednesday at 2.66% for a second session. It rests 32 basis points beneath its average for 2011.
The 30-year yield also remained unchanged for a second day at 4.30%, or 32 basis points under its average for the year. The two-year yield also hovered at 0.40% for a second consecutive day after 20 straight sessions at 0.42%, and another 17 at 0.44%. It stands at its nadir for the year and 20 basis points below its average for 2011.
Treasury yields started Thursday morning weaker. The 10-year yield jumped five basis points to 2.93%.
The 30-year also rose five basis points to 4.22%. The two-year yield inched up two basis points to 0.38%.
There was good news on the employment front. The Labor Department reported Thursday that initial jobless claims in the week ending July 9 fell 22,000 to 405,000 on a seasonally adjusted basis.
That marks the lowest level of initial claims since mid-April. Also, continuing claims for the week ending July 2 climbed to 3.727 million.
Economists anticipated 415,000 initial jobless claims and 3.67 million continuing claims, according to the median estimate from Thomson Reuters.
Muni traders are anxious for congress and President Barack Obama to find a solution to the U.S.’s rapidly approaching debt ceiling. As though to give legislators and the president a push, Moody’s Investors Service Wednesday placed the U.S. government on review for possible downgrade from its gold standard triple-A rating. Standard & Poor’s reportedly has clandestinely warned lawmakers that the debt ceiling needs to be raised so no payments are delayed.
